Standing Committee B

[Mr. David Amessin the Chair]

Mike O'Brien: I beg to move,
That—
(1) during proceedings on the Fraud Bill [Lords] the Standing Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 20th June) meet-
(a) at 4.00 p.m. on Tuesday 20th June;
(b) at 9.00 a.m. and 2.00 p.m. on Thursday 22nd June;
(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 6.00 p.m. on Thursday 22nd June'.
We look forward to a good debate during the course of the Bill under your wise chairmanship, Mr. Amess.

Dominic Grieve: May I welcome you to the Chair, Mr. Amess? I suspect that the Committee may be passed in such harmony that our debates may be even briefer than we expect. However, we will have an opportunity for some serious consideration of the Bill. Although the Opposition do not much care for programme motions, this one is sufficiently innocuous as to not merit too much of my attention.

David Heath: Mr. Amess, may I also welcome you to the Chair? My suspicion is that the Committee will be a good-tempered, intelligent and well-argued one. It is a pleasure to deal with Home Office or home affairs business that is not as contentious as we have done on occasion.
There is general agreement that the Bill has merit but there are details that we will wish to explore in depth. However, I suspect that the programme motion, for once, gives us adequate time to deal with the niceties of matters before us. There is no need for me to delay the Committee further, other than to say that I know my hon. Friend the Member for Cheadle (Mr. Hunter) is simultaneously serving on another Standing Committee on the Company Law Reform Bill. Therefore, although I will welcome my hon. Friend’s presence, I understand the essential dichotomy that faces him in being a member of two Committees at the same time.

Question put and agreed to.

David Amess: Presumably, at some stage, the weather will get warm. If Members wish to remove clothing, within reasonable limits, please do so. If anyone has a complaint about any matter, if they would kindly see us, we will do something about it.
I remind Members that adequate notice should be given of amendments. As a general rule, I and my fellow Chairman, Mr. Martin Jones, do not intend to call starred amendments, including any starred amendments that may be reached during an afternoon sitting of the Committee.

Clause 1

Fraud

Question proposed, That the clause stand part ofthe Bill.

Mike O'Brien: Mr. Amess, it is a pleasure to introduce clause one, which introduces the new general offence of fraud. It establishes the three ways in which the offence can be committed. These are fraud by false representation, failing to disclose information and abuse of position. The new offence will extend to England and Wales and Northern Ireland. It will have a maximum custodial sentence of 10 years. The new offence closely follows proposals set out in the 2002 Law Commission report on fraud, which concluded:
“The existing legislation was deficient in a number of respects.”
The over-particularisation of the deception offences in the Theft Act means that it is possible for some behaviour to fall outside the statutory offences. Therefore, defence lawyers can argue that it may have been some form of deception but it was not that precise form of deception. The prosecutors have charged the defendant with the wrong offence.
There is the risk that the offences are going to result in unjustified acquittals and costly appeals. The reliance on deception, as an essential ingredient of the crime, is problematic if it is not always clear that there is a victim who has been deceived. For example, a shopkeeper may have accepted a credit card for a payment not knowing, or being indifferent to, whether the cardholder has the authority to use the card, provided that the transaction results in the shopkeeper being paid, which it normally would.
The Law Commission concludes that the laws of fraud could be improved by the introduction of a general offence of fraud. A general law would improve the prosecution process, first by reducing the chances of offences being wrongly charged. Secondly it would, by virtue of its simplicity, be fairer to citizens who might face a trial and would better be able to understand the law. Thirdly, it would provide a greater flexibility to keep pace with the increasing use of technology in crimes of fraud.
The proposals for this offence were widely welcomed during the consultations undertaken by the Government and will improve the law of fraud by moving away from the existing patchwork of deception offences towards a clearer definition of fraud. The simplified and rationalised fraud offence will provide those working on the frontline with the necessary tools to be able to tackle fraud more effectively.

Dominic Grieve: May I first of all apologise for removing my jacket without permission? I made an assumption of your benevolence that I should not have made, although I am delighted that having done so, I was not ticked off. I thank you for that. Broadly speaking, I welcome the new offence of fraud and have no doubt that the Solicitor-General is right in what he says about the necessity of having such an offence. I also welcome the manner in which the Law Commission put forward the proposals. The Government have followed those proposals inclause 1 and I have every reason to welcome what has been done.
If I was to flag up a concern, it would be one that will become clearer a little further on in the Bill, when we come to fraud by abuse of position. But it is also worth highlighting it as this stage. As the Solicitor-General rightly says, one of the consequences of what we are doing is dealing with the problem of the victimless crime.
Although little crime is victimless, my experience of fraud cases—in particular, one long fraud trial in which I was involved—was that, as the Solicitor-General has highlighted, the prosecution case collapsed precisely because it was unable to show upon whom the false representations had been operated. As I was appearing for the defence I suppose I was jolly glad about this.
The case was one of mortgage fraud. The nature of the crime was that fictitious applications were being made for mortgages in the names of all sorts of people who did not exist, or front individuals were being used to apply for mortgages. But the mortgages all related to real properties. As the case proceeded, it became quite clear that those operating in the building societies at a time when the market was entirely buoyant and was rising spectacularly could not have cared less where the applications for mortgages were coming from. As far as they were concerned, they knew that the lending was secure on the property; therefore, the fact that the circumstances in which this information was coming to them was totally bogus was of no interest to them.
A cynic might have said that they were rather pleased to get the work; as they were all on bonuses according to the amount of mortgages that they were handing out and they knew that the lending was secure, they may even have turned a blind eye to the fact that the person submitting this large number of mortgages was in fact concocting the names of the people making the applications.
That illustrates precisely the sort of point the Solicitor-General and the Law Commission have highlighted and which clause 1 is designed to deal with. The sort of activity I have just described would be caught by the clause because, by its very nature it was a case of false representation and failures to disclose information about what was taking place.
I make that point to the Solicitor-General because as we look at the Bill in its entirety, we will have to be careful to try to ensure that we draw a dividing line between activity we wish to criminalise and activity that we might regard as morally reprehensible but which I have some doubts as to whether we would wish to make criminal. That comes to light particularly when we consider abuse of position. I highlight that now because it may be advantageous to look at it in terms of the broadest framework of the Bill before we move on to the specifics. To summarise, we are completely satisfied with clause 1 and with the broad thrust of the Bill, which merits support.

David Heath: May I echo the closing words of the hon. Member for Beaconsfield (Mr. Grieve)? There is common agreement that the Law Commission has done an extremely good job in issuing its report and recommendations. Its argument for simplification and rationalisation of fraud offences is one that is difficult to argue against. As Griew noted about theft,
“No one wanting to construct a rational, efficient law of criminal fraud would choose to start from the present position. The law...is in a very untidy and unsatisfactory condition.”
That is a commonly held view. The conclusions are to be applauded not only because they provide clarity where there was a lack of it and because they provide offences that are comprehensive where there was a lack of comprehensiveness in respect of previous offences, but because there is a higher likelihood of successful prosecution when a simple test can be applied. At the moment, there is every opportunity for the defence to produce technical arguments in favour of acquittal that bear no relationship to the actual acts that took place. They are essentially legal arguments rather than arguments about fact. I support clause 1. It is a sensible measure.
I understand the point made by the hon. Member for Beaconsfield about the danger of having something so broad and encompassing that it covers behaviour that we may consider occasionally falls short of criminality, which nevertheless is not to be encouraged. When framing statute and offences, there is a difficulty whether we make them so comprehensive to ensure that criminal acts are without doubt caught within that compass or make them so particular that they fail to do that. There are arguments on both sides and we must accept that often we must make a compromise between those two positions and that a lot depends on the good sense of the prosecuting authorities in respect of what is put before a court.
When considering such matters, we must be extremely careful to make sure that we are not putting in the hands of prosecuting authorities an overbearing offence that can be applied improperly to those who are, in the judgment of most people, acting in a way that is worthy of opprobrium, but not criminal sanction. However, we shall be debating that matter later in the Bill. I welcome clause 1 and feel no need to amend it or argue against it.

Mike O'Brien: I am grateful to both hon. Gentlemen for the way in which they set out their views. We can clearly deal with the abuse of position when we discuss the amendments. The Government considered some of the points raised, particularly whether there should be a broader offence in respect of fraud but, although a general offence should be created, there would be obvious risks in making it so broad that it would be imprecise and unclear about what would be covered by it.
The Government took the view that the Law Commission’s recommendation that there should be a general offence, with its specific limits categorised in the subsequent clauses that we shall come to, was the best way forward, and that we had therefore got the balance right. I am grateful to both main Opposition parties for saying that they, too, feel that the Law Commission and the Government have got that balance right.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2

Fraud by false representation

Question proposed, That the clause stand part ofthe Bill.

Mike O'Brien: The clause makes it an offence to commit fraud by false representation. The offence was recommended by the Law Commission and widely welcomed in responses to the Government’s consultation paper. A representation is defined as false if it is “untrue or misleading”, and if
“the person making it knows that it is, or might be, untrue or misleading.”
The types of representation covered by the clause may be of fact or law, including a representation as to a person’s state of mind. They can be stated in written or spoken words, or in non-verbal communication.
Clause 2 goes wider than the existing Theft Act 1968 offences, which rely on the deception of a victim. Under clause 2, it will be immaterial whether the person subject to the false representation believes it to be true. The fact that the representation was made will be sufficient evidence to prove the crime.

Dominic Grieve: I do not wish to repeat what I said earlier, and clauses 1 and 2 have a clear linkage. The major change in the law that the clause brings about is that it will no longer be necessary to show that the dishonest representation acted upon the mind of another person. There will therefore be a great simplification in the presentation of cases.
As I highlighted in my earlier example, there will be a grey area in such cases because of the extent to which there is sometimes collusion between the person being “deceived” and the person doing the deceiving. The matter is not always as clear cut as one might think. Certainly, from my experience of criminal practice, the turning of a blind eye to a deception that may be of mutual advantage occurs quite frequently in the fraudster’s canon. Prosecutors and judges will have to exercise a measure of discretion in such cases, particularly when it comes to sentencing, and that may prove quite complex. That having been said, I think it right, as a basic principle, that Parliament should insist that individuals do not make dishonest representations for the purpose of obtaining gain for themselves. I do not see anything wrong with the philosophical principle behind clause 2. For that reason, it commands my support.

David Heath: I would take a similar view. I just want to make a couple of observations about the framing of the clause, for reference when we discuss later clauses. First, there is a clear mens rea in this clause, which I think is right. Secondly, the term is
“dishonestly makes a false representation”,
not “makes a dishonest representation.” That is an important distinction. There are two factors in play: first, there is the issue of whether the representation is false; secondly, making that false representation is a dishonest act in itself, and there is the issue of whether the person is aware that they are dishonestly making a false representation. That has relevance to debates that we will have on later clauses, but it would be wrong of me to explore that area further at this stage. I simply point out, for the benefit of the Committee, that that is the case.

Mike O'Brien: I am grateful for the way in which Opposition Members have raised their views on the clause, and for the general support for it. I have one point to make to the hon. Member for Somerton and Frome (Mr. Heath): the current definition of dishonesty was established, as the explanatory notes say, in the case of Ghosh in 1982. The judgment sets out a two-stage test. To respond to the hon. Gentleman’s point about dishonesty, the first question is whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people. If the answer is positive, the second question is whether the defendant was aware that his conduct was dishonest and would be regarded as dishonest by reasonable and honest people. That is the approach to dishonesty that we want to see the Bill take.

Question put and agreed to.

Clause 2 ordered to stand part of the Bill.

Clause 3

Fraud by failing to disclose information

Question proposed, That the clause stand part ofthe Bill.

Mike O'Brien: Clause 3 will make it an offence to commit fraud by failing to disclose information. The Law Commission’s initial consultation paper proposed that mere non-disclosure of information should not suffice for an offence of deception. However, during its consultations, a substantial minority of respondents argued that from the victim’s point of view, a failure to reveal material facts can be just as devastating and tantamount to deception by conduct.
The Law Commission, in revising its proposals and moving away from the overriding concept of deception, concluded that the ordinary concept of fraud is wide enough to embrace at least some dishonest non-disclosure. It noted that it is arguable though by no means clear that that is the effect of existing law, at least where there is a legal duty to disclose. In its final report, it therefore recommended creating such an offence, and the Government sought views on that in their 2004 consultation paper.
Reactions to the paper showed that a majority welcomed this second limb of the general offence. The only point of controversy was the issue of going beyond legal duties. A suggestion was made in consultation that failure to disclose information could amount in some cases to a false representation and that such cases were therefore already covered implicitly by the first limb. However, it was also recognised that it might be helpful, particularly for juries, if the point were made clear in law. The Government agreed with that view.
The Government also considered the argument that if the offence is restricted to situations where there is already a legal duty to provide information, it will add little to existing law, as failure to meet the legal obligation will carry its own sanctions. We do not agree. Even though the offence will be limited in that way, it will add to the law, as the existing sanctions for such failures might be of a civil nature, difficult to pursue and unlikely to lead to sufficient sanctions. The clause clearly sets out our position.
There will be difficulties relating to how failure to disclose information arises, and it must be for the prosecutors, the courts and in due course the jury to determine whether the person who failed to disclose the information did so with the intention to act dishonestly. Clause 3 clearly sets out the terms, and I hope that we will have general agreement on it as well.

Dominic Grieve: I think that the Solicitor-General will get agreement on the clause, although it and clause 4 are closely linked, so we need to consider both to understand what they will achieve.
As far as the element of offence in clause 3 is concerned, the key issue is what it places a legal duty on individuals to disclose. It might be helpful if the Solicitor-General gave the Committee some examples of individuals under a legal duty to make a disclosure. If I have understood correctly what the Government are seeking to achieve, the clause will place a considerable restriction on who will be caught by the provisions.
Clearly, there are numerous instances in which individuals might elect not to tell somebody something because they think that it is to their financial advantage. The classic example is the person being offered an object for sale at £50 who knows very well from his greater expertise that the item is worth £50,000 and chooses not to tell the vendor. He is under no legal duty to give him that information and, therefore, he would not be caught by the provisions of clause 3.
Those circumstances seem to encapsulate what clause 3 is trying to do. I am broadly supportive of that, but we need to be clear. What might be helpful during the course of the debate is if the Solicitor-General confirmed whether my understanding of clause 3 is correct and amplified examples of what he regards as a legal duty. I take a legal duty to be a duty prescribed by law—no more and no less—and not a duty prescribed by morality. Perhaps a more interesting and difficult area is whether that covers duties that could be thought to be equitably placed upon his shoulders. Having a certain amount of clarification would be helpful before we rush in headlong and—which I would want to do—approve clause 3.

David Heath: I look forward to the explanations, which will be extremely helpful. My brief comment is in similar form to my comment on the previous clause. I simply point out that clause 3(a) says that he
“dishonestly fails to disclose to another person the information which he is under a legal duty to disclose”
and not information that he is expected to disclose. That has relevance when we come to consider the next clause.

Mike O'Brien: I am grateful to the hon. Gentlemen for the way in which they set out their views on the clause. Probably the best place to start is with the concept of legal duty, as explained in the Law Commission report on fraud, in paragraphs 7.28 and 7.29.
Looking at the duty, with such duties there is an overlap between clauses 3 and 4. There is also a view that a legal duty can arise in a number of ways, primarily by operation of law, but not necessarily prescribed by law in the sense that a duty can arise by the nature of a relationship that has been formed.
I will come back to the Law Commission report in a moment, but let me make that clear. When people are engaged in commercial relationships, there is the principle of caveat emptor, which has been restricted by various pieces of legislation over the years by Parliament. Let the buyer beware. That will still be the case. When people engage in normal commercial relationships, the buyer will need to be beware, to be aware of what the person who is selling the product says.
The clause will do for situations where a legal duty has been created prior to or during the course of a relationship between the alleged victim and the defendant. There is therefore a duty on the defendant to disclose to the potential victim various information. An example would be where a solicitor fails to tell a client relevant information about the law or case that would result in the solicitor gaining financial benefit personally and the client losing. There is a clear relationship between the solicitor and the client. There is a duty to disclose that information. He has failed to disclose that information. He has done so knowing that he has the duty and, therefore, he has acted dishonestly. The result of that should be that he has failed to disclose information and therefore committed an act of fraud.
Another question might arise in a more difficult case, when a person is applying for insurance and has a heart condition, which they failed to disclose. That is a civil matter; to some extent, it involves a breach of an uberrima fides duty to disclose information in particular types of contract. Obviously, insurance companies may well take the view that they would deal with that through the civil procedures and that would be the normal way. However it is possible for someone who was deliberately intending to obtain insurance coverage and, in due course, to make a claim on it to be in a position where they were failing to disclose relevant information where they had a legal duty to do so, with the intention of benefiting, either by insurance coverage or by undertaking a medical procedure using that insurance. The result might be that they are in breach of the clause.
Those are a couple of examples of examples of where there is a clear duty and where failure to disclose information may well put someone in breach of the clause. I hope that those comments deal with hon. Members’ concerns and that the Committee will allow the clause to stand part of the Bill.

Question put and agreed to.

Clause 3 ordered to stand part of the Bill.

Clause 4

Fraud by abuse of position

Dominic Grieve: I beg to move amendment No. 2, in clause 4, page 2, line 22, leave out ‘expected' and insert ‘under a fiduciary duty'.

David Amess: With this it will be convenient to discuss amendment No. 7, in clause 4, page 2, line 24, leave out ‘is expected' and insert ‘has a duty'.

Dominic Grieve: As I indicated to the Solicitor-General earlier, the clause has caused me and, I suspect, some of my hon. Friends and others in the House, a little more trouble than previous clauses. I should make it clear to the hon. and learned Gentleman that the problem does not lie in the principle behind the clause: it is generally agreed that if a person is in a position of trust he owes a duty to the person who has entrusted his or her affairs to him not to abuse that position. That includes not abusing the position
“to make a gain for himself or another, or...to cause loss to another or to expose another to a risk of loss.”
That is a well established principle. Barristers, solicitors, accountants know well the underlying principles behind it, and if people have been abused, civil remedies lie against those who have abused their position in that way. Translating that into the criminal law is, on the face of it, perfectly reasonable.
The greater problem comes in defining who is in a position in which he is
“expected to safeguard, or not to act against, the financial interests of another person”.
Who are we talking about? Historically, we have, I think, been talking about people who, in the old-fashioned parlance—that is the nature of the amendment that I tabled—are “under a fiduciary duty” to another person to act in their best interests. The Government have chosen—the Solicitor-General made that clear on Second Reading—quite deliberately to move away from that description to one that, on the face of it, is much looser. Such a person is defined as one who
“occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person”.
Who is to make the judgment on who occupies a position in which they are
“expected to safeguard, or not to act against, the financial interests of another person”?
The law should, as far as is possible, contain a degree of certainty. The way in which clause 4 is worded gives me cause for concern, because it is by no means clear to me who is the person referred to in clause 4(1)(a). If it is an accountant or a solicitor, it presents no problem. I suppose that if we were to move and say somebody who has been entrusted with the affairs of a near relative by a power of attorney or a continuing power of attorney, we would not think there was any difficulty, either. But what happens in those myriad informal relationships that arise and on which human relations depend? Where is the dividing line to be drawn in respect of a person occupying a position in which he is expected to safeguard another’s interests?
There is no list. It is not as if Parliament is being asked to be prescriptive. There is an underlying suggestion that the definition will be left to develop on a case-by-case basis and will gradually be evolved over time by the courts and, presumably, by juries in their verdicts and by judges on submissions. I am slightly anxious about that. It ought to be possible for us to define things more tightly.
My amendment would insert the notion of fiduciary duty, which is well understood, but I should like to make it clear to the Solicitor-General that it is in the nature a probing amendment to provoke debate. I appreciate that there may be other ways to approach the matter.

Ian Lucas: Of course the hon. Gentleman understands the concept of fiduciary duty, and I hope that I, as a solicitor, understand it, but is not the point that most of the general population would not understand the phrase “a fiduciary duty” and what it means?

Dominic Grieve: That is true, although I should have thought that a judge would be capable of explaining to a jury what a fiduciary duty is. In the course of a criminal trial, if a fiduciary duty appears in the relevant statute, the judge ought to be in a position to explain that to the jury. Furthermore, a judge would also be in a position to rule, on a submission of no case to answer, whether the prosecution had laid the basis of whether a fiduciary duty existed.
The difficulty of the present wording of the clause is that, other than leaving the matter to a judge on a ruling of no case to answer, the case is pretty much open to the jury. The old saying, when I was first at the Bar, was that perhaps we should get rid of all forms of criminal code and simply present facts to a jury, which would be allowed to say on its verdict “in order”, “out of order” or “totally out of order.” There is a sense that that is what we are doing with the clause: a set of facts is put to a jury and it is asked, “Is it in order, out of order or totally out of order,” and on that depends guilt or innocence. That worries me.
As I said earlier to the Solicitor-General, hopefully the criminal code is in accordance with moral principles. However, many people are allowed to behave in an immoral fashion and still not face criminal sanction. The wording of the clause leaves a grey area. Let me give an example, which has just come into my head, of the sorts of problems that might arise.
Earlier, I mentioned buying and selling. A person is helping his aged aunt with her affairs, in the course of which she gives him access to all her private papers. From those, he discovers that a bust sold out of the family 20 years before in a house sale was made by Bernini. Nobody knew about that at the time, but it is clear in the family papers to which he has been given a degree of access by his aunt. That bust is now for sale in the antique shop down the road, so he zooms down there; nobody knows that it is a Bernini bust and he buys it at a vastly discounted rate—it is the bargain of a lifetime. He does not tell his aunt; he just takes it home and puts it in his house.
Did that person abuse his position? After all, his aunt allowed him access to her papers. He took advantage of the information that he gleaned from those papers and made use of it for his own benefit. Hon. Members must understand that the aunt was not ga-ga; she just asked him to help her. To what extent would he be caught by clause 4? One might consider what he did to be morally reprehensible, but was it a crime?
I have picked one example; we could pick dozens of others. Mine illustrates my slight anxiety that we might be casting our net too wide on the waters, the consequence of which is to create uncertainty. Of course, Parliament might wish to modify the behaviour of human beings, which is not necessarily an undesirable objective, but we must be careful about making sure that the scope of the criminal law in such an area is properly restricted. Otherwise, as always happens, we encounter the law of unintended consequences.
I have given an illustration, and I hope that the Solicitor-General will discuss the issues that it raises so that the matter can be explored further. It is one thing for somebody to be entrusted formally with something, but are we really going to say that taking advantage of information gleaned in the course of a relationship of friendship, without any formalised trust being involved, is a criminal act and that we wish it to fall within the scope of clause 4? That is the difficult dividing line about which we must think.
I emphasise to the Solicitor-General that I have not reached a conclusion on the subject; I am feeling my way. I suspect that the Bill, having gone through the other place, will probably go on to the statute book in its present form. However, I hope that we can reflect on the serious and difficult issues that I have raised through my amendment before we simply rubber-stamp clause 4.

David Heath: I support amendment No. 2, but I shall speak to amendment No. 7, which is on similar lines.
I concur with the hon. Member for Beaconsfield (Mr. Grieve). I do not think that, in its present form, the clause is likely to cause a massive injustice, but I have a nagging feeling that it is sufficiently loosely worded to allow for ambiguity. I draw attention again to the fact that the wording in clause 3 is precise. It mentions
“a legal duty to disclose”,
whereas clause 4 uses less precise language, referring to
“a position in which he is expected to safeguard”
another’s interests. That opens up questions, which I expressed on Second Reading, about who is doing the expecting. Is it to be the judge, the jury or the person who has a form of relationship with the person indicted? Is the view of the man on the Clapham omnibus to be taken on what constitutes a reasonable expectation?
When we intervened on the Solicitor-General on Second Reading, he was anxious to put our minds at rest, but he came close to saying that the phrase “is expected to safeguard” comes close to “what he is under a fiduciary duty to do”. I do not think I am putting words in the Solicitor-General’s mouth by saying that, in his view, there was little difference between an expectation and what formed a duty. He was also at pains to say that, at the end of the day, the courts must decide the matter and that the prosecution has the responsibility of establishing that relationship and that expectation—or, as I prefer it, that duty.
I still do not understand what advantage there is in framing the offence as the Solicitor-General has in the Bill. What circumstances that do not fall within “duty”, but do fall within “expectation” does he expect to catch? I have read carefully at what the Solicitor-General said, which is why I framed my amendment in a perhaps more lax way than it would have been framed had I used the precise term “fiduciary duty”. On Second Reading, the Solicitor-General said
“Of course, the duty may well go beyond a mere fiduciary one; other duties could be encompassed. We can deal with such detail in Committee.”—[Official Report, 12 June 2006; Vol. 447, c. 537.]
Well, here we are and we are now expecting to deal with that detail.
What I really need from the Solicitor-General is some illustrations what duties might be encompassed. Because I have an expectation and he has a duty to provide such illustrations to the Committee, that is why I have used the phrase “has a duty” in my amendment, so that it could encompass other duties that the Solicitor-General brings forward for our consideration.

Dominic Grieve: I understood that that was what the hon. Gentleman was trying to achieve in proposing the mere word “duty”. Of course, the problem with the mere word “duty” is that, unless the sort of duties one is talking about are defined, it is capable of being as loose as an “expectation”, because what one person regards as a duty another person might not. We shall still have the same problem unless we produce a comprehensive list of expectations or duties.

David Heath: That is probably true. My expectation is that the Solicitor-General will perform his duty in giving us that list in Committee so that the courts have something to work on. That is a firm expectation and one that I expect to see met in a few moments.
I support the purpose of the clause. I do not want it not to work. There must be a reason behind using that loose and ambiguous term without stating a clear view on in whose mind the expectation has formed that there is some requirement for one individual to safeguard another’s financial interests. If it cannot reasonably be argued that the person who is accused of fraud under the clause should be aware of that expectation, it seems that we have a slightly dangerous instrument before us. If there is a legal duty, a fiduciary duty, it is reasonable to assume that the person should know that they are in that relationship and they should be aware of that in legal terms. However, the present wording of the clause falls short of that. There are circumstances in which a jury, judge or court might form the view that there was an expectation but there is no reason to suppose that the person who committed the act was, or could be, aware of that expectation because they had not entered into any form of contractual or professional relationship that implied that expectation. That is my concern and that is what I hope that the Minister will be able to satisfy us on when he replies to the debate.

Geoffrey Cox: I should declare an interest in that I have been a practising lawyer, particularly in the field of fraud, for well over 20 years. I appeared in the case of Regina v. Preddy, to which I believe the Minister referred, in which some of the shortcomings of the Theft Act were illuminated by the House of Lords in 1996. I also appeared recently in a case of some notoriety that collapsed after two years called the Jubilee line extension fraud. I therefore have some considerable experience in the field of the practice of fraud in the criminal courts.
I have to say that although I usually appear on the defence side I often wonder, sometimes aloud and sometimes silently, at the difficulties—the mire—into which prosecutions appear to get themselves when they are confronted with prosecuting major frauds. I have no doubt that the offence in the clause will make it easier for the prosecution to bring their case and to explain it to a jury, which is why I broadly support it. However, I believe that particularity and precision are vital components of the criminal law and that when the ambit of the criminal offence is broadened and relaxed, one runs into a fundamental problem whereby, as my hon. Friend the Member for Beaconsfield said, forms of conduct are criminalised which, on reflection, no responsible legislature would wish to criminalise. Clause 4 crystallises that concern.
I invite Government Members to consider the position of employees, which may be of substantial concern to them. There is no doubt that, whatever the nature of the employment, an employee is bound by implied, if not expressed, terms of the contract, to a duty of confidentiality. There are certain necessary responsibilities that go with any contract of employment, whether one works in the humblest capacity in the mailroom or at directorial level. On closer examination, it becomes apparent that the clause may become a stick with which to beat employees whom the employers regard as having breached their terms of confidentiality or otherwise breached their expectations.
I will give one example. The employee who, in the hope of a job with a rival firm or company, decides in the pub to let a rival window cleaning firm know that his firm is seeking to extend its business in another part of the geographical area in which they live. On the face of it, that situation would be covered by the offence in the clause—it would be fraud. There would be an expectation on the part of the employer that the employee would not disclose even relatively dilute and unimportant detail of the future plans of his employer. 
The employee would have acted in the hope that perhaps one day—particularly if he anticipated that in the shake-up of the company’s organisation, he might be made redundant—he might gain a job with the rival employer at some future date. However, I respectfully submit that it would be hard to contend that that employee ought to be found guilty of the crime of fraud set out in clauses 1 and 4, even though he occupied a position in which he was expected by his employer not to act against the financial interests of another person—his employer.
If an employee disclosed details, even fairly minor and minimal details such as, “I know that a window-cleaning firm is going to expand in Bideford,” that disclosure could be interpreted by a jury as being contrary to the financial interests of the employer. However, the provision would expose thousands of employees the length and breadth of this country to the risk of a complaint of fraud being made to the police by their employers, and given that the offence is so broadly defined, the employees would potentially face conviction.

Greg Hands: Does my hon. Friend agree that that may become a particular problem in the City of London where such discussions happen all the time between employees, current employers and future employers? Might not the measure imperil London’s position as the No. 1 financial centre in Europe?

Geoffrey Cox: I did not want to draw in such vulgar realms as the City of London. I wanted to bring it down to the level of the ordinary person’s experience. I am genuinely concerned about this clause. There is a real problem with it. What on earth does “occupies a position” mean? The Minister says that the clause and the Bill in general are designed to remove from defence advocates the rich harvest of opportunity to argue over the terms and definitions of criminal offences, but I have to tell him that I can see a very broad realm for my colleagues at the Bar to explore. They may ask questions such as: what is “a position”? It seems to have some kind of formal connotation. Does it mean a position of employment, a position of trust, or simply a type of position in some informal relationship, as my hon. Friend the Member for Beaconsfield said?
The clause refers to a person being “expected to safeguard”, but expected by whom? By the employer, in the case that I just suggested? The clause continues:
“or not to act against, the financial interests”.
Does that mean the immediate financial interests, or would it be a defence to say, “Well, it may not have been in his short-term financial interests, but in the long term, what I did was definitely in the interests of my employer, for the following reasons”? We will have endless debates in the courts of law on whether something was in the financial interests of the person who is said to be the victim, because, as my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) pointed out, we are not always looking at auntie and nephew; we are often looking at vast multinational organisations, where it is not easy to judge whether a particular act by a director or employee may have jeopardised those financial interests. The argument may well be advanced: “I did it in the best interests of the firm.” Thus the court will become bogged down in examining the economic status of the entire company or economic enterprise concerned when trying to decide whether an action was in its financial interests.
The Committee may regard my argument with a degree of scepticism, but let me assure hon. Members that that is precisely what will happen. It is precisely what happened in the Jubilee line case to which I referred. The charge in that case was conspiracy to defraud, but it was at the ultimate frontier of what had in the past been considered conspiracy to defraud. The passing of very low-level commercial intelligence—similar to the information that I mentioned on whether a window cleaning firm should extend its activities into the town of Bideford—was regarded as a conspiracy to defraud. The question was bound to arise whether it could be proven that passing that intelligence had a damaging effect on London Underground’s financial interests.
I submit that that is a question that the Committee ought to consider with extreme care. Any precision that we can bring to the clause, particularly along the lines suggested in the amendment proposed by my hon. Friends, would have something to commend it. The amendment would insert “a fiduciary duty”, rather than leaving the offence to rely on an expectation. We would like more precision. Let me explain the reasons why. To go back to my employment law example, not every employee is in a fiduciary relationship with his employer. A fiduciary relationship is a precise legal term; the law defines it well, and it applies in a range of relationships. The law understands it, and it is not difficult to interpret to a jury. Inserting that phrase would remove the great mass of employees from the risk of prosecution for what the employer regards as an abuse of the employee’s position.
I urge the Committee to consider extremely carefully whether the amendment should be made. It would further define the offence and make it more precise. It would assist, because there would be no question of the ordinary employee being caught by the offence, whereas under the current drafting there is a real risk that we will get bogged down. I assure the Minister, although I am sure that he does not need assuring, of the ingenuity of defence advocates, who will find much to be pleased by in the Bill. However, by the insertion of the phrase proposed by my hon. Friends, some greater precision could be brought and some of those arguments will be avoided.

Jeremy Wright: Mr. Amess, may I also welcome you to the Chair this morning? It is a delight to follow my hon. Friend the Member for Torridge and West Devon (Mr. Cox), although I suspect a disadvantage, but I will do my best. I want to make a couple of points about the clause and to support amendment No. 2.
It seems that there are two difficulties with the use of the phrase “expected to” in relation to the position that the clause describes. We must be clear—other hon. Members have already made reference to it—who has the expectation and how realistic that should be.
Not every expectation is realistic or reasonable. As Members of Parliament, we know that. The Solicitor-General, as a Minister, knows that. The public sometimes have expectations of their Government, which he may regard as unrealistic or unreasonable. If that word is to be used, we must be clear about how realistic or reasonable any expectation should be.
There is another difficulty. The hon. Member for Wrexham (Ian Lucas) indicated that the advantage of language such as “expected to” is that the public will readily understand it, whereas “a fiduciary duty” is something that must be interpreted by lawyers. We must look at paragraph 7.38 of the Law Commission’s report, which is reported in paragraph 20 of the explanatory notes. I accept, incidentally, that the Law Commission says that it does not believe that fiduciary duties should be the limitation of the clause. However, it goes on to say:
“This does not of course mean that it would be entirely a matter for the fact-finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions.”
It seems clear that, in the Law Commission’s view, lawyers would have to be involved in the definition of “expected to” in respect of the relationship that it describes. If that is so, the legislation does not provide the clarity for which the hon. Member for Wrexham is looking. It ought to be this Committee’s task to give as much clarity to the law as we can at this stage and to save the courts the job of doing so at a later date.

Mike O'Brien: I was much taken with the question posed by the hon. Member for Somerton and Frome, as to whether a Minister is in a fiduciary relationship in dealing with questions in Committee. It is debatable, in that my duty is to the Crown as a Minister and secondarily, probably, to Parliament as a whole. Am I in a fiduciary relationship with the hon. Gentleman? Those questions are perhaps academic.
It is important that we are clear about what the law says. The law has to cope with a vast array of different circumstances which arise from time to time. The danger that we have seen with the 1968 and 1978 Acts is precisely the problem that the hon. Member for Torridge and West Devon appeared to be anxious to repeat here. He said that particularity is vital. However, the Law Commission defines the problem with the law on deception as over-particularisation of the definitions that are imposed. The world has moved on—there have been technological developments and changes in the way in which our society behaves. The legislation was not able to cope with that because it was over-particular. We need to avoid that. Those amendments aim to reduce the scope of clause 4. They would go against the recommendations of the Law Commission, which have already been mentioned by the hon. Member for Rugby and Kenilworth (Jeremy Wright).

Geoffrey Cox: Will the Solicitor-General give way?

Mike O'Brien: Let me make the point and then I will give way to the hon. Gentleman. Let us look at the whole paragraph. The hon. Gentleman quite fairly looked at the final part of that paragraph. The hon. Member for Somerton and Frome asked, “So who is he and where does the relationship arise?” The hon. Member for Beaconsfield asked “Is it all in order?” It is more than that. It is also more than a mere fiduciary relationship.
The Law Commission states:
“The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice. We see no reason, however, why the existence of such duties should be essential. This does not of course mean that it would be entirely a matter for the fact-finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions.”
The Conservative amendment seeks to provide that clause 4 will apply only if a person has a fiduciary relationship to safeguard the interests of another. The Liberal Democrat amendment refers only to a duty. By that I assume that it means some kind of legal duty, which may or may not go wider than a fiduciary duty. I assume from how the hon. Member for Somerton and Frome put it that he was referring merely to a fiduciary duty.
My concern is that the criticism made of the Government—that the measures will lead to legal wrangling—is the very issue that might arise if the amendments were accepted. Lawyers would have the opportunity for a lot of discussion about precisely where a fiduciary relationship arises. We should remind ourselves—

Geoffrey Cox: Will the Solicitor-General give way?

Mike O'Brien: Let me first quote Lord Justice Millet, because what he said about fiduciary relationships is important:
“He is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”
The duties create the nature of the relationship; the relationship is not of itself the cause of the fiduciary duties.

Dominic Grieve: Will the Solicitor-General give way?

Mike O'Brien: I shall give way to the hon. Member for Torridge and West Devon first and then to the hon. Gentleman, but I want to develop my argument.

Geoffrey Cox: Will the Solicitor-General incorporate into the development of his argument his understanding that the concept of fiduciary duty is flexible in law? The categories of fiduciary duty are not closed. At its heart is the concept of trust. The law will extend fiduciary duties where it recognises the hallmarks and characteristics of a relationship based fundamentally on trust, specifically trust relating to the management of property and finance.
The amendment would give greater soundness and solidity to the question of what relationship the accused party should have, and would exclude—I ask the Solicitor-General to incorporate this question into his argument—employees who would otherwise be faced with exposure to abuse. The concept is flexible. I am sure that he understands that.

Mike O'Brien: The concept of a fiduciary was set out in 1996 by Lord Justice Millet in the Court of Appeal, in Bristol West building society v. Mothew. He said:
“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances that give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty”—
that phrase is important—
“of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not put himself in a position where his duty and interest may conflict; he may not act for his own benefit or that of third person without the informed consent of his principal”.
He goes on to make the point that I referred to earlier:
“He is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”
The obligations may not be present in a range of informal personal relationships and it would be difficult for the prosecution to prove the existence of fiduciary relationships in certain informal circumstances, even though it would be clear to the man on the Clapham omnibus or the man in the street—however the hon. Gentleman wants to describe it—that one person occupied a position in which he was expected to safeguard the interests of another. We do not want to get ourselves into a situation where a complex legal argument about the nature of a fiduciary relationship and whether it exists is the subject of the case, rather than the court and jury looking at the relationship as a whole and taking a view as to whether those circumstances produced a relationship where there is a legitimate and proper expectation that there was a duty owed and someone was expected to safeguard or not to act against the financial interests of another person, and that position was dishonestly abused.
I will take interventions from the hon. Members for Rugby and Kenilworth and for Beaconsfield, but I still have to develop the argument and it might be easier if they waited until then before they intervened. However, I will happily give way.

Dominic Grieve: I shall try not to intervene too much, but we are having a good dialogue. What I found rather odd was that the Solicitor-General developed the argument about fiduciary duties and read out Lord Justice Millet’s judgment, but in fact that precisely encapsulated the sort of behaviour and person we wanted to cover. The hon. and learned Gentleman emphasised that fiduciary relationships are not fixed and that the category can be expanded, but that again provides me with greater reassurance that that is the correct definition.
The problem is that once we start moving into such informal relationships we get into an area where things become indefinable. I gave an example earlier. I would be interested how the Solicitor-General would respond to the young man who takes advantage of his aunt’s benevolence but does not owe or is not specifically being asked to safeguard her financial affairs, even though he takes advantage of the trust she places in him to get a financial advantage for himself. Is that intended to be covered by the legislation?

Mike O'Brien: I disagree with the hon. Gentleman only to some extent. In my view, a fiduciary relationship includes those relationships that we wish to see part of the clause, but does not encapsulate—to use his word—the whole of the nature of those relationships. I will come to the auntie and employees in a moment, if I can.

Jeremy Wright: I rise to reinforce the point of my hon. Friend the Member for Beaconsfield. From the Solicitor-General reading out that definition, it already seems clear that the inherent advantage of the amendment is that we can clearly define a fiduciary duty. As far as I am aware, there is no comparable definition of a person who is expected to safeguard the interests of another.

Mike O'Brien: If the hon. Gentlemen had waited, they would have seen how the argument has developed and why it has developed as a result of the consultation. It would be difficult in some circumstances for prosecutors to argue that a particular relationship, which members of the public may well see as a relationship where someone is expected to safeguard the interests of another, was necessarily a fiduciary relationship. While in most cases the measure would apply to circumstances where a duty clearly exists, there would be some cases where a formal legal duty may not exist. Those cases will arise particularly in personal and family relationships. The great majority of those who responded to the consultations in 2004 supported clause 4 and some made comments that were pertinent to the debate. For example, in welcoming clause 4, the Institute of Legacy Management referred to the need to tackle the financial abuse of the elderly, an issue that was increasingly causing it concern. It said that
“charities have noticed an alarming rise in estates where the testator’s funds had been misappropriated prior to death”.
It cited the case of a tradesman who, having helped an old lady with odd jobs, gained increasing influence over her and misappropriated funds from her account.
The North of England trading standards group also said that, in most cases when vulnerable elderly people were deprived of property unlawfully, the perpetrators were either relatives or workers who were supposed to be supporting the victims’ independent lifestyle. Many elderly people are looked after by helpers who do not have formal power of attorney, but take various degrees of responsibility for their finances. Few abuse their position, but it would not be right that those who do so should escape prosecution for fraud just because they have no full legal or fiduciary duty to that elderly person or because the Crown Prosecution Service has a difficulty proving that fiduciary duty beyond reasonable doubt.
We see no problem in a jury determining when one person is in a position to safeguard the interests of another. Furthermore, in most cases the crucial issue will not be the relationship between the defendant and the victim, but whether the defendant’s actions were, in its sum, dishonest.
A number of questions and examples have been put to me. As for the auntie and the nephew to whom the hon. Member for Beaconsfield referred, that depends on the nature of the relationship and what has been taken. If, of course, the nephew had stolen a bust there would be no doubt about what had happened. However, difficult cases always make for an interesting analysis. On the face of it, the particular item was no longer in the aunt’s possession. She had dispensed with it. He obtained information about its value, so he decided to buy it. If there were a relationship in which he was supposed to be looking after her interests in a particular way, that relationship might produce a expectation, but it does not seem on the face of it that that is likely to happen if it were merely the case that he happens to come across the information, purchases the bust and makes some money on it. That is just a receipt of information that results in his becoming slightly wealthier. It may be immoral; perhaps he should have shared it, but I do not think that it would be unlawful unless the relationship was a more particular relationship than the one that he described.
Paragraphs 21 to 23 of the notes on clauses cite several examples involving employees. One is about
“an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead at the expense of the employer, commits an offence under this clause.”
Another example concerns an
“employee of a software company who uses his position to clone software products with the intention of selling the products on would commit an offence under this clause.”
The notes also refer to an example
“where a person who is employed to care for an elderly or disabled person has access to that person’s bank account and abuses his position by removing funds for his own personal use.”

Dominic Grieve: It is impossible to understand why that last example, from paragraph 23, was included, because the person would simply have committed theft. That highlights my anxiety that this will turn into the catch-all provision to get round the need to charge other perfectly clear offences. It is not needed in the context that is claimed in the explanatory notes.

Mike O'Brien: It may be theft, but the individual may also have the right to remove items from the account and only later take them for his personal use. Whether that were so would depend on the precise circumstances that might arise.
The hon. Member for Torridge and West Devon gave an example of an employee disclosing commercial information to another potential employer. The question arises about whether that employee is acting dishonestly. The prosecution would have to prove that there was a particular relationship, that the information was the subject of that relationship, that the employee ought to have known that and that the employee acted dishonestly to better himself. I was surprised by the intervention by the hon. Member for Hammersmith and Fulham, who took the view that that would virtually bring down the whole City and the clause would bring the financial set-up in the UK crashing down around us. I do not think that it will do so.
The clause says that a relationship, which can and in most cases will be fiduciary, may sometimes—as we have seen from our consultation—go beyond a fiduciary relationship and may involve a relationship where there is a legitimate expectation on the part of a potential victim that the person who has access to their money, or whatever, should not behave in a way that abuses that position. That may go beyond a fiduciary relationship. I do not want to end up with the problem of the over-particularisation of a clause, from which we are trying to extract ourselves with the Bill.
The clause enables us to deal with the fiduciary problems that hon. Gentlemen have suggested exist, and it goes beyond that. A number of those who replied to the consultation indicated that there are issues beyond fiduciary relationships—so, too, has the Law Commission. In view of the fact that both the Law Commission and those consultees have put to us strong points to the effect that a fiduciary relationship is important but not adequate, we should enable the clause to go beyond that. I hope that, in view of that explanation, the hon. Member for Beaconsfield will ask leave to withdraw the amendment.

Dominic Grieve: There is another issue that only occurred to me as I read the clause again. The clause makes it clear that it applies to a person who occupies a position, not somebody who occupied a position. Will the Solicitor-General comment on that? As it is drafted, the clause creates the interesting consequence that it would apply to a person who was still in employment as an employee, but if he abused his position of trust after he had ceased to occupy that position he would not be caught by it. Is that what the Government intended?

Mike O'Brien: It is an interesting proposition. A person can occupy a position where they owe a duty that goes beyond the performance of a job. A contract that is entered into that obliges a person to have duties of confidentiality, perhaps, can go well beyond the time when that employment ceases. The duty may, however, still arise. The person entered into the duty at the beginning of the employment and it exists indefinitely. Therefore a person may still occupy a position in which there is a legitimate expectation. That may well, by virtue of a contract and the agreement that the employee entered into voluntarily, go beyond redundancy or the point when he leaves the post.

David Heath: I found the last point raised by the hon. Member for Beaconsfield interesting and disturbing because it seems to me that my amendment would have been better if it had required the omission of the words
“occupies a position in which he is expected”
instead of merely the words “is expected” so that the clause would have described someone simply as having a duty to safeguard the relevant interests. That is something that we may need to explore again on Report.
I entirely respect the Solicitor-General’s argument, but I am a little alarmed by the paucity of examples of matters that fall outside the concept of a duty, whether that is narrowly defined, in relation to the fiduciary duty—we have already had an explanation about that—or viewed as a wide, expandable and mutable definition and nevertheless coming within the definition of expectation. This is one of the rare occasions when I can criticise the Law Commission, because its report also fails to deal with the matter. It baldly says that there may be cases and that it will be for the court to determine them and for the prosecution to demonstrate its case, but it gives no examples of what those instances might be, and why they would be of such import as to require a redefinition of what is a stand-alone offence in the provision. Someone would be required to have done nothing else besides being subject to the ill-defined expectation and, in that context, to have acted in the dishonest way specified.
I am still concerned, although as I said at the beginning I do not think that if the clause is not amended grave injustices will result. However, there will be an ambiguity in the law, which will be susceptible to argument, and could have the reverse effect to the one intended by the Minister of tightening the legislation. It provides an alternative legal argument, whereas a crisp and clear definition would not enable such ambiguity to arise. I am interested in what the hon. Member for Beaconsfield has to say, but if he intends to press his amendment I am inclined still to support it. I am not yet persuaded, despite my best intentions to be so, by what the Solicitor-General has had to say.

Dominic Grieve: I have listened carefully to the Solicitor-General and am mindful of the point that he has made, which was restated by the Law Commission, that fiduciary duties on their own may be too restrictive a definition because of the nature of informal relationships. That seems a valid point, which the Committee must consider. If we do not succeed in considering it properly here, perhaps we need to return to it on Report.
I remain troubled, however, and the last question that I asked, about what it means to occupy a position and whether the wording covers “occupied” as well as “occupies”, seems to go to the heart of the issue. As the reply came back, I heard my hon. Friend the Member for Torridge and West Devon say sotto voce exactly what was coming into to my mind: the provision covers every breach of confidence.
Let me give an example that goes back to my childhood. In her memoirs, the Queen’s nanny told some entirely innocuous, but nevertheless revelatory stories about the time when she looked after the Queen. I have no doubt that nannies who take their charges out, once those charges are at toddler age, have a responsibility to safeguard them and not to act against the financial interests of another person. Apart from anything else, they should make sure that the shilling is not dropped in the gutter, but actually used to pay for the ice cream, although they are clearly unlikely to have responsibility for the detailed finances of the person concerned. Given the Solicitor-General’s comments, however, it seems to me that, quite apart from a potential breach of confidence and a civil liability, the way in which the clause is drafted means that such a person is potentially subject to a criminal responsibility. That may be what the Government intend. It may be what the Law Commission intended. However, reluctant though I am to enter into a difference with the Law Commission, which is a body of learned people, I wonder whether it has fully thought through the consequences of the way in which clause 4 is drafted.
It is possible that the tabloid press have missed the point and that clause 4 is the dynamite that the Government intend to use to bring to an end to the frequent breaches of confidence that appear in the tabloid press. That might be a good thing. I often think that people who publish the kind of books that I have described are acting in a dubious way and in accordance with a dubious morality, but it has never crossed my mind that that was an appropriate area for criminal sanctions, yet that is what the Bill would introduce. Of course, such a case would have to get past a jury, and juries, with their robust viewpoint, may decide that they are not happy with this developing area of the law and simply refuse to convict people, as we have seen them do on other occasions. Indeed, those of us who have been barristers have come across juries who have refused to convict a person on clear evidence that an offence has been committed, because their own moral sense tells them that the person was in some way entitled to commit the offence. On the whole, those of us who draft law should try to avoid provoking such problems, but, in the clause, we are creating them.
My amendment might well be too restrictive, but in the absence of anything else, I am inclined to press it to a vote, if only to register with the Solicitor-General the desire—I do not suppose that we will carry the vote—that the Government go away and think again. I am prepared to help, to co-operate and, if a better formula is produced, to go along with it. As things stand, however, I have an underlying anxiety that the clause is too widely drafted and covers a vast range of behaviour, some of which should undoubtedly be subject to criminal sanction, but some of which should not. We are in danger of creating a catch-all provision that will be a nightmare of judicial interpretation and which could ultimately help to bring the law into disrepute, which is undesirable. [Interruption.] The Solicitor-General wishes to intervene, so I shall give way to him.

Mike O'Brien: I was going to respond.

Dominic Grieve: I am grateful. In that case, I shall bring my remarks to a close. I shall listen to what the Solicitor-General has to say and then perhaps say one or two words about whether I shall withdraw my amendment or press it to a Division.

Mike O'Brien: I am grateful to the hon. Gentleman for the way in which he put things, so let me see whether I can assist him.
I have two points to make. First, I fear that if we go along with the approach that the hon. Gentleman suggests and restrict the ambit of the clause, we shall leave elderly people as the Institute of Legacy Management and the north of England trading standards group suggested. Both organisations were concerned that elderly people were being exposed, in effect, to fraud by relatives or workers who would not be covered by the ambit of a fiduciary relationship. It is for the hon. Gentleman to decide whether he feels that it is right to leave elderly people exposed in this way. A number of people who feel that they should not be left exposed in this way have made representations to the Government.
Secondly, I fear that the hon. Gentleman exaggerates the effect that he expects the clause to have far too much. He exaggerated a small point about whether we should use the word “occupies” rather than “occupied” into a massive point. Let me read out the provision, which refers to a person who
(a) “occupies a financial position in which he is expected to safeguard, or not to act against, the financial interests of another person,
(b) Dishonestly abuses that position, and
(c) Intends, by means of the abuse of that position—
(i) to make a gain for himself or another, or
(ii) to cause loss to another”.
That drafting provides several additional safeguards, so we do not have the massive expansion of imprecision that the hon. Gentleman fears. Many of the examples to which he referred of breaches of confidentiality and so on would properly be the subject of civil law, and the civil court is where they would normally be dealt with. There may well be circumstances in which a person can generally have fulfilled all the conditions of the clause: that is, they occupy a position in which they are expected to safeguard another’s interests, they act dishonesty and they intend by means of abuse of that position—that is the additional safeguard included in the clause—to gain thereby.
Clause 4 is therefore limited to cases where individuals have a position of some kind of trust. A person who is no longer in such a position—for example someone who no longer occupies the position of trustee—is not caught by the clause, provided that the abuse takes place subsequently. One can abuse a position only if one has one or if one has created one by the nature of one’s contractual relationships. There are safeguards in the provision.
I hope that the hon. Gentleman will feel, on reading the clause as a whole, that those safeguards will be sufficient to ensure that we are not creating some sort of, as he put it, catch-all. We do not wish to create one. We want to provide the basis on which to deal with circumstances that arise not only in fiduciary relationships, but in the sorts of cases that the Institute of Legacy Management and the north of England trading standards group have identified—cases in which all of us would want the elderly to be safeguarded.

Dominic Grieve: I certainly want the elderly to be safeguarded and I do not wish to restrict the scope of the clause to prevent that from happening. Clearly, the elderly and the vulnerable are categories of person whom I would assume were specifically in mind when the clause was drafted.
I have another question. I shall allow the Solicitor-General to intervene again if necessary, because we have time to debate this matter fully. He read out Lord Justice Millet’s judgment. A carer employed by a person who is vulnerable might be given their credit or bank card and their PIN and might try to extract money from a cash machine; leaving aside the question of theft if they appropriate some of that money for their own use rather than giving it to or using it for the benefit of the person concerned, that carer has a fiduciary duty. I would find it difficult, on the basis of Lord Justice Millet’s cogent definition, to say that such a relationship did not exist.
Fiduciary, by its nature, means a relationship of trust wherein someone is imparted information that can be abused. That is why I am by no means certain that if we were to restrict the definition to a fiduciary one, all the people whom the Solicitor-General thinks would thereby be excluded would in fact drop out of the picture. If he thinks that I am wrong about that, I would be happy to hear why, because, on the basis of the judgment that he quoted and the definition that he read out, it seems to me that such people would in all probability be caught.

Mike O'Brien: Lord Justice Millett said that
“The principal is entitled to the single-minded loyalty of his fiduciary.”
Is the hon. Gentleman suggesting that a fiduciary duty is owed by a worker who comes on behalf of meals on wheels to supply food to an elderly lady at lunch time and in the evening, and who takes advantage of that position? Clearly there is an expectation that that worker should not take advantage of her position, but does she owe a fiduciary duty and a single-minded loyalty? I think not. Do relatives who come in from time to time to help have a legal fiduciary relationship? The hon. Gentleman may well be able to argue in court that such a relationship exists, but I suspect that the lawyer for the other side would argue strongly that it does not, and if the latter argument were accepted, the hon. Gentleman would leave that elderly lady exposed to such behaviour.

Dominic Grieve: I understand what the Solicitor-General is saying, but it seems to me that he is referring to a completely separate category of offence. It frequently happens that individuals take advantage of a degree of trust and to abuse that trust in order to steal from another person. A carer who is given access to a house and who, instead of preparing or serving the meal, steals money from the mantelpiece commits theft. I had assumed that fraud by abuse of position was designed to deal with individuals who were entrusted with information that could be dishonestly abused to make a gain or to cause loss. The obvious example is the one I gave, where one gives one’s PIN and card to someone, saying, “Could you please go down to the bank and extract the money?” Such an individual is in a completely different category, because the point at which one has given them all the elements to carry out a financial transaction on one’s behalf is the point at which those elements can be abused. That is a different category from the one in which carers fall.
I would be surprised if the Solicitor-General was really saying that clause 4 was intended to try to provide an easy way of prosecuting individuals such as informal carers who gain access to property and then steal it. There is plenty in the armoury of the criminal law to deal with that problem.

Mike O'Brien: I assure the hon. Gentleman that if someone goes into an elderly person’s home and steals some money, that situation is covered elsewhere in the criminal law. Nobody is suggesting otherwise. The new provision is meant to catch other circumstances. It may cover that situation too, but one would not choose to prosecute such a theft as a fraud.
We are considering circumstances in which people may have the key to someone’s house, or their pension card or pension book, and may collect their pension, or obtain information as a result of documents that may be in the house. The situations about which those who made representations to us were concerned were those in which someone has a relationship with such a person that supports their level of independence—situations in which there is an element of trust, but that does not extend to what Lord Justice Millett described as the “single-minded loyalty” of the fiduciary. The hon. Gentleman’s argument that the provision be restricted to fiduciary relationships would leave a vulnerable group of people exposed, and I do not think he wants that. We do not, and we have had representations from others that they do not, either. It is on that basis that we put the wording in the clause,
“he is expected to safeguard”.
Such a person is in a position where they are trusted, but it might not go as far as having a legal relationship which involves an entitlement on the part of the other person to their single-minded loyalty. The person may have loyalty to many others.

Dominic Grieve: As a practising barrister I have a loyalty to all sorts of people, with lots of clients going at the same time. I have to say to the Solicitor-General that I am not wholly satisfied with his use of that single-mindedness. To me, a person who is handed a benefit book is in a fiduciary relationship with the person who has entrusted it to him. “Fides”—that is where the word comes from.

David Heath: I am glad that the hon. Gentleman said that. It seems to me that the example the Solicitor-General uses is most peculiar. The element of trust that has been given to that meals on wheels lady implies a single-minded duty and a single-minded loyalty. There is a fiduciary relationship. That may not apply to everything that person does in her capacity as a meals on wheels lady, but in respect of that position of trust which has been formed, it seems to me as a layman that a fiduciary duty does exist. It also seems that if it does not exist, there is no reasonable expectation that could be demonstrated in a court of law that that person has a duty to safeguard the financial interests.

Dominic Grieve: I agree with the hon. Gentleman. The last thing that I would want to do is, by pressing my amendment to the vote, remove the elderly and vulnerable that he describes from the proper protection they ought to have from people who abuse positions of trust. However, I do not think that my amendment would do that. It would provide greater clarity in relation to the informal relationships that we touched on earlier, which constitute an extremely grey area. It will also clarify the potential problem of this law extending into breach of confidence generally.
This is not an easy area but, having listened carefully to what the Solicitor-General has said, he has not persuaded me. Therefore I wish to press my amendment to a Division.

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Question proposed, That the clause stand part ofthe Bill.

David Heath: I shall be brief. I would like the Solicitor-General to put on record why it was felt that it was not necessary to accede to the original recommendation of the Law Commission in respect of a secrecy element to the offence in the clause. The Law Commission took the view that one of the necessary requirements of the offence was that the person against whom the fraud was committed should not be aware of the fact that the person was acting in the way that they did; if they were aware, it negated the offence. That has not been incorporated into the Bill, and it would be helpful if the Solicitor-General explained why.

Mike O'Brien: Although the Law Commission recommended that there should be an offence of fraud only if the abuse of a person’s position is both dishonest and secret, after considering the arguments advanced during the consultation, the Government decided not to make secrecy part of the offence. It is difficult to define exactly when something is secret and when it is not. How many people have to know about it? What if people can say, “It was secret from me, but it may not have been secret from my colleague at work.”? It difficult to define exactly what secrecy means, and it becomes an unnecessary complication and an over-particularisation. We felt that an offence may well be committed even if the information or the circumstances in which the abuse takes place are not secret. On that basis, and to avoid a lot of technical and legalistic arguments, as well as the problem of over-particularisation, we took the view that we would not include secrecy as an element of the offence.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5

“Gain” and “loss”

Dominic Grieve: I beg to move amendment No. 3, in clause 5, page 2, line 38, leave out subsection (3).

David Amess: With this it will be convenient to discuss the following amendments: No. 4, in clause 5, page 2, line 40, leave out subsection (4).
No. 8, in clause 5, page 2, line 40, after ‘might’, insert ‘reasonably and lawfully’.

Dominic Grieve: The first two amendments in the group are probing amendments, but through them we seek to engage in debate on the definition of gain and loss.The Solicitor-General may well be able to reassure me, but my concern is that the definition of gain in subsection (3) specifically includes
“a gain by keeping what one has, as well as a gain by getting what one does not have.”
In ordinary parlance, a gain is normally obtaining something to add to what one already has. Saying that it actually means keeping what one already has raises a number of issues on which I would like further clarification from the Solicitor-General.
I understand that it is possible by dishonesty to avoid paying something to somebody else, thereby retaining it for oneself, but if one is doing that, one is causing the other person a loss. In what circumstances does the Solicitor-General envisage that a gain by keeping what one already has would not include causing a loss to someone else by not paying them what is their due? I simply ask whether subsections (3) and (4) are not in fact otiose and unnecessary.
Subsection (4) does the reverse of subsection (3). It states:
“‘Loss’ includes a loss by not getting what one might get, as well as a loss by parting with what one has.”
That fits precisely with my earlier point: if one prevents someone from getting something that they are entitled to, that is clearly a loss to that person; but what are the Government trying to cover by referring to a person not getting something that they might get? It refers, I suppose, to the chance of getting something. Perhaps that is what the Solicitor-General is aiming at. Iam slightly happier with the definition of loss in subsection (4) than with the need to particularise gain in the manner specified in subsection (3). The central issue is the circumstances in which one might gain by keeping something that one already has when that does not cause a loss to another person.

David Heath: My amendment in the group is No. 8, and it probes a point similar to that raised by the hon. Member for Beaconsfield. The definitions of gain and loss are imported from the Theft Act 1968, but when we deal with fraud we deal with slightly more mutable subject matter.
My concern is about the phrase
“not getting what one might get”.
One “might get” all sorts of things. One might get things illegally, through serendipity or in a number of ways that should not be encompassed by the definition in the clause. My amendment would insert the words “reasonably and lawfully”, which would at least provide a concept of entitlement—the word used by the hon. Gentleman. It would provide the concept of someone having a reasonable and lawful expectation to receive something. That would narrow the scope a little, without in any way destroying the essential element in the definition or what the Government are trying to achieve.

Jeremy Wright: Does the hon. Gentleman agree that the part-definition of loss as
“not getting what one might get”
is exactly the same as being exposed to “a risk of loss”, which is already explicitly covered in clauses 2, 3 and 4, which deal with the types of fraud that may be committed?

David Heath: The hon. Gentleman makes a perfectly valid point, and I would welcome the Solicitor-General’s comments on it.

Mike O'Brien: The Bill is based on the Law Commission’s thorough review, which started way back in 1998, of the deception offences in the Theft Acts. It recommended that the Theft Act definitions of gain and loss should be applied to the new offences because they are well understood in the courts and have caused no great difficulty.
Clause 5(3) fulfils the policy that gain should include keeping what one has. That means that the avoidance of payment may, in certain circumstances, amount to fraud. Section 2 of the Theft Act 1978 has a special offence of evading by deception a liability to make a payment. An example would be when a man borrows money from a neighbour and, when a payment is due, tells a false story about a family bereavement or tragedy, which persuades the neighbour to cancel the debt. That may be the example that the hon. Member for Beaconsfield asked for.

Dominic Grieve: But that would cause loss to the neighbour, would it not?

Mike O'Brien: It would, in the sense that the neighbour would not receive the payment back in a particular way. The payment might not involve the exact same sum as was lent, or there might a different arrangement whereby something else was to be paid back. That might mean that the neighbour had lost not what he had given, but something else that he might have hoped to get. A person may wish to receive payment of a debt in a number of ways; we need to ensure that the law does not create a gap or lacuna that would result in our not taking proper account of all such circumstances.
Insider training is an example of a situation in which there is a gain but no loss or it is difficult to show loss and any loss may be indirect or diffuse. That would include trading to keep what one has. Let me turn to subsection (4) because it is the obverse of this. It derives from paragraph 7.45 of the Law Commission’s 2002 report in which it said that loss in the sense of:
“not getting what one might get should be sufficient for the new fraud offence.”
They added:
“thus, it could be fraud to prevent another person from receiving money or other property, which that person might otherwise have received.”
An example might be where an employee is entitled to some special payment from his employer. The employer wrongly informs him that he is not so entitled. Such cases may also involve gain to the defendant, but the gain may not always be so easy to prove as the loss.
In our 2004 consultations, we asked stakeholders specifically if they agreed with the commission that gain and loss should be defined equally under the Theft Act. More than 70 stakeholders took the trouble to reply and the vast majority agreed with the proposal. In so far as there was any disagreement, it was on the question of whether the definition should go wider. A few respondents did not believe that fraud should be tied to gains or losses in property.
However, we agreed with the majority and with the Law Commission that fraud must be defined as an economic crime, if it is not to become too unhelpfully wide a concept. The vast majority of stakeholders thought that the Bill definitions should be aligned with those of the Theft Act 1968, which apply, for example, to the offence of false accounting. Changes, under both the Theft Act and the Bill, may appear in the same indictment. We therefore consider that it is important that the definitions in the Bill should be consistent with those that apply to the Theft Act offences. If we amend it, we are going to create a real problem of confusion in court with judges having to explain different definitions.
I am aware that Justice, which sadly failed to reply to our invitation to comment in 2004, has provided a briefing argument against the policy, to which the vast majority of stakeholders have agreed. We do not agree with the points in its briefing. It gives an example of a case, which someone raised in the course—

David Heath: I think it was the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd).

Mike O'Brien: Ah yes, it was. The hon. Gentleman reminds me that it was the hon. Member for Meirionnydd Nant Conwy who raised that example, but I will not go into it because it was more than a little confusing and more algebraic than legal. We will avoid that. However, I had assumed that the Liberal Democrats had used the Justice amendment.

David Heath: I, too, found that example more confusing than illuminating. My reading of the provision is that the loss of a gain which might be expected by an illegal act, would still be a loss which the offence could apply to. For example, if someone was intending to supply cocaine and, by fraud, a person substituted flour for the cocaine, so that person would no longer be able to occasion the gain that he would otherwise have done by selling that cocaine, that would be a fraud under this definition, would it not? I ask the Solicitor-General whether that is a reasonable interpretation or one that we should avoid?

Mike O'Brien: I suspect that anyone engaging in such a report to the police would find themselves quickly arrested themselves. There are all types of circumstances in which criminals can claim that some confederate had breached the criminal law. Nonetheless, I do not find them regularly going to the police to complain. I suspect that I they did, the police would welcome them with open arms and open cell doors as well.

David Heath: But the supplier who had been defrauded would not be guilty of any criminal offence in that he had not supplied a controlled substance; he would have supplied flour.

Mike O'Brien: He may well have committed a different kind of offence, unless he was acting as an agent provocateur for the police or something, in which case he may have committed no offence at all. That people would start to report such things to the police is unlikely. He need not worry that those are the sorts of things we are intending to catch. If we do catch them, that would be entirely accidental and fortuitous perhaps, because it would expose other crimes.
The hon. Gentleman also referred to amendmentNo. 8. The amendment seeks to clarify what constitutes “loss” for the purpose of the new offences. As discussed, the offences apply only if there was an intention to make a gain or loss. The amendment seeks to provide that to be a loss the property that the victim might have received had he not been defrauded should be limited to that that he might have reasonably and lawfully received.
If the intention is to provide greater clarity to the definition of “loss”, I do not consider the amendment necessary. As I have made clear, the clause as it stands follows the definitions in section 34 of the TheftAct 1968. The Government’s view is that implicit in the reading of the section 34 definition is that the property lost should be the type that the person ought to have had. Cases are difficult to imagine, but perhaps the hon. Member for Somerton and Frome has described one where we could get ourselves into a position where we need to be sure of the lawfulness of a particular relationship. However, in the real world we need to make sure that we have circumstances that the courts can understand and which the police can deal with straightforwardly. The definitions put into clause 5 of the legislation enable the courts and police to know what they are dealing with, because they have dealt with them over a long period of time in the Theft Act. The Act has not caused a great deal of difficulty, but amending it in any way might produce a lot of difficulty for the courts. I hope, if on no other basis than that and to avoid such difficulties, that the hon. Gentlemen feel they can withdraw their amendment.

Geoffrey Cox: May I raise a possibility with the Solicitor-General? Section 34 of the Theft Act 1968 defines gain and loss, but defines them against a specific set of statutory-defined offences—theft. He described them as over-particularised, although I do not accept the characterisation of all of the Theft Act as over-particularised.
What troubles me is in subsection (4)—
“‘Loss’ includes a loss by not getting what one might get”.
If that is a definition as in the Theft Act, one can steal something that “one might get”—I suppose one understands that—meaning the loss of a benefit to which one is entitled but has not yet come into possession of. My worry is that that seems to incorporate the loss of chance. That seems to suggest that one can be convicted if all one deprived somebody of is a chance, something I might get. It is not necessarily something I would get and not necessarily something to which I am entitled, which is maybe what the hon. Member for Somerton and Frome has been getting at; not necessarily something to which I am entitled, but something I might have come into.
For example, what if I fail to place a bet? Let us suppose that the Solicitor-General asked me to pop down the road and make a bet on the next election. I do not know which side he would bet on, but let us suppose that he asked me to make such a bet and I decided, because I did not think that he would make a gain in that way, not to place the bet. I could be guilty under the measures if I fulfilled the other criteria. I was expected to safeguard his interests, I ought to have placed the bet and I dishonestly did not do so because I did not want him to gain. All that I have deprived the Solicitor-General of is the chance that he might be right; a rather remote chance, depending on whom he put his money on.
Is that what is intended—that the loss of a chance, perhaps a fairly fragile and implausible chance, should be sufficient? I raise the point in the hope that the Solicitor-General can answer, although I realise that it is rather difficult to answer some questions on the hoof.

Mike O'Brien: I am looking at a copy of the Theft Act 1968 and of the Fraud Bill. The definitions have not produced such technical problems up to now. The hon. Gentleman’s example is perhaps not a good one, although I realise that he is doing it on the hoof, as am I, because we are discussing a wager. There is no obligation to pay, only a relationship.
Certain circumstances might arise in which a chance of getting something was frustrated. The courts, police and prosecutors would have to consider whether the other circumstances under the clauses had produced sufficient dishonesty and other elements to lead to a charge. The other elements would be key in those circumstances.
Paragraph 4.6 of the Law Commission report points out that conspiracy to defraud can apply to cases that put another’s financial interests at risk, and considers that a new fraud offence should apply to exposing another to a risk of loss. One of the key questions that Opposition Members raised on Second Reading was whether conspiracy to defraud should be removed from the Bill or should be included in the Bill so as to remove it from law. Their view has strong arguments, and indeed our view does too.
Conspiracy to defraud is a common law development that has quite a broad ambit and is very youthful. We feel that we ought to maintain it for the time being, but we hope that at some point in the future we will be able to remove it. To do so, we will have to create new legislation in the Bill to ensure that we cover the circumstances previously covered by conspiracy to defraud.
Section 34 of the Theft Act 1968 and clause 5 of the Fraud Bill will produce the coverage that will enable that. We hope to be able to consider the Fraud Bill’s effects once it has been passed and the way that it is being used in the context of the guidance that the Attorney General will issue shortly—I have distributed the drafts to Committee members—and decide whether we can remove conspiracy to defraud. If we removed the wording in question, we would restrict the clause’s ambit, knowingly failing to cover some of the area now covered by conspiracy to defraud.

Geoffrey Cox: I understand the Solicitor-General, but it has long seemed to me that there is a serious terminological inexactitude used when talking about the risk of loss. Fraud law discusses risk of loss—the loss of the chance that one might get something, or the remote prospect when betting on a horse that it might come home—but if one examines the case law behind it, one finds that when it talks about exposure to the risk of loss, it always means that a director or somebody in a fiduciary position has taken a risk with a specific, identifiable and tangible asset.
Let me give the Committee a classic example. A director takes money from the company that he is director of, invests it in the overnight market in Tokyo but returns it to the company bank account the following morning. He says that he had no intention of causing loss, because he was going to return the money and he wanted to make a profit for the company whose money it was He was just going to cream off part of the profit that was made over the 24-hour period. The danger is that in moving it in that 24 hours and putting it on the market in Tokyo he exposed that sum of money—that identified asset—to loss. That is the meaning that the law of fraud attributes to the phrase “risk of loss”.
I fully accept that there has been a confusion for many years, but clause 5 adopts the loss of a chance as being sufficient. It will be enough if the betting ticket is not submitted and the horse comes home first or third. That is so remote in terms of causation—there is such a lack of proximity between the act done and the potential loss—that there is a real risk that people will be indicted for forms of losses of a chance or risk that are remote. That is a genuine concern and we must not get foxed in respect of the idea of the risk of loss; it really means exposing something to a risk that depreciates its value.
Let me give the Solicitor-General another example. Often the case law on risk of loss refers to a deception in a mortgage case. The mortgage company will have advanced a loan based on a detail that is false; someone will have exaggerated their net worth or some such thing. That loan is an asset and it is less valuable because, on any credit analysis of it, it is a less secure loan. Thus, the risk of loss that is created by the deception—someone has failed to produce honest details about their net worth—impacts on the value of the asset. If the truth were known, its value as an asset would be less than it would otherwise have been. That is the context in which the law refers to risk of loss.
The danger of this phraseology is simply that one can expose somebody to the chance that he might, if happenstance had happened in a particular way, have gained something. That is very vague and has an attendant danger. I invite the Minister at least to reflect on that.

David Amess: Order. I simply make the point to the Committee that there is traditionally a difference between speeches and interventions, but I did not want to spoil the hon. Gentleman’s flow.

Mike O'Brien: I was so lost in the example that I also thought it was a speech.
Our objective is to deal with circumstances in which there is an exposure to risk of financial loss. It is also the case that any prosecutor, and, in due course, any court, would have to examine the remoteness of any chance in determining whether there had been an element of dishonesty and the other elements necessary to prove the case. I am not sufficiently aware of the case law to say whether this has produced a lot of difficulty in terms of definition.
We are not proposing to rewrite the whole of the Theft Act 1968. As I pointed out on Second Reading, when it was originally drafted it was regarded as a model of clarity and of showing the particular circumstances in which the criminal law applied. In some, but not all, of its sections, we have had to deal with the problem of over-particularity because society has changed. That is what we are trying to deal with in the clause.
Any court and prosecutor will have to consider the element of remoteness in deciding whether the other elements of the case are proved, and whether the provisions of clause 5(4) are sufficiently met. I suspect that, if it is too remote, it will not be prosecuted. We cannot here deal with all the details of the various cases; we have to do our best to set out the intentions of Parliament in the wording of a clause, in a way that does not produce unnecessary confusion in the courts. That is what we have tried to arrive at in the clause. In view of the fact that we use the definition in the clause in other clauses, I hope that we can stick to it. It may well be that the Law Commission later decides to change it and to deal with some of the points raised, but I do not think that this is the point at which to change it.

Dominic Grieve: This has been a fascinating debate, and I am particularly grateful to my hon. Friend the Member for Torridge and West Devon for his contribution on the issue of loss. Our two amendments sought to delete subsections (3) and (4). The Minister has persuaded me that we should leave in subsection (3). It may be a belt-and-braces job, but I certainly do not think that there is any mischief in it. It may be otiose, but let it remain.
I certainly will not press our amendment to delete subsection (4), and I shall ask to withdraw it, but I shall think about the matter a little further, because as I listened to the interesting exchanges between the Solicitor-General and my hon. Friend, it became apparent to me that there was an issue at stake that I had perhaps not originally looked into or fully understood when I drafted the amendment. Could one not re-word subsection (4) so that it said “‘loss’ includes the risk of loss, as well as a loss by parting with what one has”? If one did that, it would entirely cover the important point of the risk of being put at a disadvantage because one has not been given the full facts, and it is quite right that that should be criminalised. The example that my hon. Friend gave was not being given the full facts on which one is lending for a mortgage. That wording would also remove the thing that caused me slight anxiety, and that originally led me to table my amendment—it clearly causes my hon. Friend a great deal of anxiety, too—namely the matter of the loss of chance, which I think is a separate issue. I remain unpersuaded that it needs to be covered by the definition of loss. My wording would separate the two out.
I say that to the Solicitor-General because he may like to reflect on the matter before Report. He might even wish to write to us, when he has taken that opportunity to reflect, and tell us whether there is another way of approaching the matter. We could then potentially return to the subject on Report. I simply highlight it because the rewording that I put forward meets the Government’s objectives in defining loss, whereas there is something unhappy about the expression,
“includes a loss by not getting what one might get”.

Mike O'Brien: I am happy to look into that, and to write to the hon. Gentleman on the point, but how does he deal with the issue of section 34 of the Theft Act? We might end up with a situation in which there were two charges with two different definitions on the indictment, which the judge would then have to explain to a jury. The assumption is that if Parliament changes the wording, it intends to make a change in the substance. What change in substance is he making? It seems that he is not seeking to make any such change, in which case it is a recipe for confusion in court.

Dominic Grieve: Perhaps I should say that I shall go away and reflect on that. Perhaps we may have come up with a better definition than the draftsmen of the Theft Act did. However, the Solicitor-General makes a perfectly good point and I shall think about it as well. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6

Possession etc. of articles for use in frauds

Dominic Grieve: I beg to move amendment No. 5, in clause 6, page 3, line 3, after ‘article', insert ‘intended'.

David Amess: With this it will be convenient to discuss the following amendments:
No. 9, in clause 6, page 3, line 3, leave out ‘for use' and insert
‘which he intends to be used'.
No. 10, in clause 6, page 3, line 3, leave out ‘connection with' and insert ‘furtherance of'.
No. 11, in clause 6, page 3, line 3, at end insert
‘carried out by him or any other person'.

Dominic Grieve: In clauses 6 and 7 we deal with an issue of detail that is of some importance and althoughit may be of greater importance in the context ofclause 7, clause 6 is the right place to tackle the matter.
I have difficulty with the clause, which says:
“A person is guilty of an offence if he has in his possession or under his control any article for use in the course of or in connection with any fraud.”
As we discussed on Second Reading—going back to the old Theft Act—this is a mixture of IT fraud and the old offence of going equipped to cheat and covers both areas; that is, having in one’s possession something that could be used in connection with fraud. What does “for use” mean? Does it mean that the prosecution has to prove that the article was for use with a fraudÂ or merely that it can be used in a fraud? If it is the latter, the clause is too widely drawn. The specific intent must be proved. As I said on Second Reading, I am anxious about that because articles that could be used in fraud could also be put to innocent uses. I am concerned to ensure that the person who we criminalise and prosecute successfully is the person who intends to use an article in fraud, not just the one who has it in his possession.

David Heath: Both of us want to incorporate that intent into the clause. May I suggest that his formulation does not quite do that? It provides for the object or article to be intended for use, but that intent does not fall on the person who is judged to be guilty of the offence. There might be a flaw in his drafting in the use of the passive rather than the active mood of the verb.

Dominic Grieve: I intended that my amendment should refer to the intent of the person when he had the article in his possession. Perhaps the hon. Gentleman’s amendment is better than mine. We shall discuss that with the Solicitor-General and if the matter is pressed to the vote and I prefer the hon. Gentleman’s amendment, I shall support his and ask leave to withdraw mine.
We are both looking at the same issue. Perhaps the Solicitor-General is in a position to provide us with reassurance. However, I am anxious, because as I have said it seems possible to have in one’s possession an article that could be used for a fraud but have it for use in a conjuring trick or to manufacture it for the purpose of using it in a conjuring trick. I am sure that one could find numerous examples. It is important that we ensure that we are not suddenly outlawing the possession of all sorts of devices or gadgets that may have a lawful application as well as a potentially unlawful one.

David Heath: I rise to speak—briefly, I suspect—in support of the basic intention of the hon. Gentleman’s amendment.

It being One o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Four o’clock.